Indian IT’s 2 lakh-hires-a-year problem

There’s no metric that’s so obsessively tracked in IT sector as the ones that relate to people. It resonates well with readers – it’s about jobs. It tells something about human behaviour – today’s Business Line has a story on attrition that also talks about how people would like to hold on to their jobs when things are bad, and how the number goes up during certain quarters when American universities take new students. It says something about politics – a recent WSJ report touches on the political reasons behind the trend of Indian IT companies hiring abroad.

And above all, it tells something about how well a company is doing – more people often equals growth.

Infosys CEO SD Shibulal points out to why it will soon turn into a problem (for individual companies): This year  Infosys will “hire 35,000 people, if you continue on this path in about seven years we’ll be recruiting about 200,000 people. This is not a viable option,” he told Bloomberg.

It’s not a viable option for any big IT services company, not just Infosys. If things go in the same direction, some companies will face it sooner than Infosys (TCS and Cognizant), and others a little later (Wipro, HCL Tech and Mahindra IT). They are aware of the problem, which is why we hear so much talk about non-linear growth. They are taking steps to address this – by automating some processes, by trying to get into areas that need less people to generate revenues and so on. TCS, for example, said that 10% of its incremental revenues will be in non-linear segments. While it’s not clear how it defines non-linearity (the specific revenue/employee ratio), TCS said it achieved it last quarter, and is confident of doing so in the coming quarters.

Even so, the number Shibulal pointed out – hiring 2 lakh people a year – raises the question if IT companies are being too complacent about non-linearity.



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